- The move from trade deals to coronavirus in China impacts equity markets.
- Aussie has underperformed despite improvement in global sentiment and better-than-expected Australian labor report.
- AUD/USD bearish, could stabilise if it recovers 0.6830/40.
The AUD/USD pair is about to end the week with a modest decline, hovering around 0.6830. It bottomed late on Friday at 0.6819, the lowest level in six weeks. Previously it recovered boosted by Australian data. The rally found resistance below 0.6880 and then pulled back toward the weekly lows.
The pair was affected by a stronger US dollar and from concerns about the new coronavirus in China. Also, speculations about more easing from the Reserve Bank of Australia (RBA) continues to weigh on the Aussie. The improvement in economic data across the globe and even from Australia did not help AUD/USD sufficiently. The jobs report showed the Australian economy added 28,900 jobs and also retail sales came in above expectations. Those macroeconomic numbers removed pressure from the RBA to cut rates gains in February but further easing is still considered by market participants.
From a fundamental perspective, analysts argue that global manufacturing may have bottomed out following the preliminary PMIs in Japan, UK, US and Europe; that could offer support to the aussie. The key risks in the short-term continue to be Australian data and the spread of the virus.
Next week, official data on China's manufacturing and non-manufacturing PMI is due. In Australia, the key report will be inflation. The annual Consumer Price Index is seen at 1.7% over the fourth quarter. In the US, the Federal Reserve will have its meeting. Monetary policy is expected to remains unchanged. Another relevant report will be US Q4 GDP growth on Thursday. Markets are ignoring Trump’s impeachment while tensions in the Middle East eased over the last days but remains a risk.
AUD/USD Technical Outlook
The AUD/USD pair continues to retreat from its December multi-month high around 0.7030. The inability to firmly recover the 0.6850 area highlights that negative outlook has momentum. On a weekly basis it is the fourth consecutive decline and the first close under the 20-week SMA since November of last year. A potential positive for the bulls is that only one time over the last years, it dropped during five consecutive weeks.
The daily chart shows AUD/USD testing an ascendant trendline from October lows, offering some support around 0.6825/30 and also near the 100 SMA at 0.6840. If it consolidates below 0.6825/30 more losses seems likely. The next strong support is seen at 0.6795/0.6800, followed by 0.6765.
If the Aussie manages to remain above 0.6830, it could point to some stabilisation but still within a bearish case, as technical indicators point south, momentum below 100 and price under the 20 SMA. A daily close above 0.6860 would alleviate the bearish pressure, and it could extend to the 20 SMA at 0.6880. Above, the pair has room to rise further, targeting 0.6920.
AUD/USD sentiment poll
The FXStreet Forecast Poll indicates that the market still see weakness in the AUD/USD pair over the short-term but it also shows expectations of a recovery, in the period from one to three months. Despite some optimism for a move to the upside in a one month period, it is seen mostly trading around current or lower levels in three months.
The Overview chart shows the monthly and quarterly moving average turned south again but still above the current price, although not very far. While some analysts forecast it will trade above 0.70 in three months, others see the pair vulnerable for a break below 0.6700.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays near 1.0800 after upbeat US data
EUR/USD stays under modest bearish pressure and trades near 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.